Next week the FOMC will likely offer more color on the widely anticipated second round of Quantitative Easing aka QE2. When such events are so widely anticipated markets generally react by moving in the opposite direction of the previous trend as in “buy the rumor and sell the news”. For this reason and with the expectation that the economy might limp along a bit faster in 2011, I intend to begin liquidating our position in the “FLAT” which is an ETF designed to capitalize on the flattening yield curve. My belief is that while the effect of QE2 could be muted, the economy could limp faster which could cause a widening of the yield curve as “Reversion to the Mean” sets in.
Be careful out there
Brad
Long FLAT